Victorian businesses struggling with power 'train wreck' as wholesale prices triple since 2015

Wholesale power prices in Victoria have increased by 238 per cent since 2015.

Pexels.com

Victorian businesses are struggling to cope with their power bills, with new analysis showing wholesale prices in the state have more than tripled since 2015.

Key points:

Business in Melbourne's south-east says electricity costs rose 83 per cent this month

"Hard to see any relief" in short term, Grattan Institute says

Many factors contributing to "extreme" price rises

Analysis from energy consultancy company Global-Roam shows wholesale power prices soared 63 per cent in Victoria between the second quarter of last year and this year.

When the second quarter of 2015 is compared with 2017, the wholesale price more than tripled — rising 238 per cent to $104 per megawatt hour.

Victorian prices have never been so high in the 19-year history of the National Electricity Market, according to Global-Roam analyst Paul McArdle.

He said the closure of the Latrobe Valley's Hazelwood coal-fired power station was just one factor contributing to the "extreme" rise, with others including high gas prices, intermittency from renewables and regulatory uncertainty.

"Those pre-disposed to draw overly simplistic 'it was due to' … conclusions are unlikely to be correct and could be dangerously misleading," he wrote.

The Wilson Transformer Company, which manufactures electricity distribution and power transformers for coal, gas, solar and wind projects at two factories at Glen Waverley and Wodonga, said its electricity costs rose by 83 per cent this month to $1.5 million for the financial year.

The company's executive chairman, Robert Wilson, said the increase would shave about $700,000 off the company's bottom line.

He said power costs for the following two financial years would then reduce to about $1.27 million and $1.17 million, which he said was still high.

"That was the best offer we could get, other offers went up to over 100 per cent," he said.

"We're now seeing some of the consequences of probably four or five things over the last several years that have all come together at the worst possible time."

Mr Wood said governments at both the federal and state level had failed to provide policy certainty about what would replace the output from the closure of coal power plants such as Hazelwood.

The gap has to this point been mostly filled by gas "just when gas is turning out to be very expensive," he added.

"We get concerned, not surprisingly, about the impact on we as consumers at a household level. But the impact on business, in percentage terms, is even bigger, because they use so much more electricity," he said.

"The longer-term outlook looks a whole lot better but in the short term ... it's hard to see any relief from the situation we're in."

St Vincent de Paul Society policy and research manager Gavin Dufty said the increase in wholesale prices would not be felt by Victorian households until next summer.

He said the state's major retailers would adjust their prices for the new year, adding about $200 to the average first quarter electricity bill.

"We saw between 6 to 7 per cent price increases in Victoria on the 1st of January this year. There will be another price reset for Victoria on January 1, 2018, and I would expect a similar price increase again," he said.

A survey earlier this year by Victoria's Chamber of Commerce and Industry showed that 1 per cent of businesses were planning to shut down because of high energy costs.

Industries such as manufacturing, tourism and construction, which use large amounts of electricity, have been the hardest hit.